Financial management in a dropshipping business

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What is the right way to manage your financial dropshipping business?

There are thousands of sellers so obviously there are lots of ways of doing it but if I try to describe the major ones it will be like that:

  • Sellers without any financial management program – that means that they just flow with it, they don’t really know if they have good performance, what is their monthly profit and if they are getting better.
  • A Seller that wants to have a financial management program – but they really don’t know how to build it, the numbers are very complicated, there is a lack of time or knowledge how to build it.
  • Sellers that have financial management programs – those are the professional ones that are waiting every month to the first day of the nest one because they really want to calculate their profit, to analyze their performance and to understand their trends.

 

Why do we need a Financial management plan?

we must set our mind and understand that we own a business. Sometimes it’s small, sometimes it’s huge but in any case, it’s a business and we must treat it like one.

I guess we don’t spend hours of studying, marketing, buying and selling just because we enjoy it – we are doing it to make money. It’s simple as that.

And if we do not know exactly how much money we are making every month – what’s the point of all of this?  hours and days you are spending, is it for nothing?

we should understand the flow of cash, to know all the details, to know that there is a positive flow and a negative as well.

 

How to build a Financial management plan?Performance

First – we need to understand the direction of cash and to measure our performance.

Where is it coming from, and who do we pay?

Let’s start talking about the cash that is coming into our business.

It comes from 3 major sources:

  1. PayPal – payments from our customers for buying products.
  2. PayPal – positive fees in cases of refunds to our customers.
  3. Credit cards /or any other way you pay your suppliers – in cases of refunds, your suppliers pay you back.

Now Let’s start talking cash that is coming out of our business.

We can divide this section into 4 sources:

  1. Credit cards/ gift cards or both – payments to our suppliers for the items we purchase.
  2. PayPal – negative fees for using PayPal services.
  3. eBay  negative fees for using eBay services
  4. specific costs – this section includes all the non – generic costs like using a warehouse, paying a VA, paying a market research software and more.

 

Second – now we must understand the relationship between the numbers in order to calculate the total profit.

 

For doing that I build an excel file that looks like that:

relationship between the numbers in order to calculate the total profit


download the excel here

Now let’s fill the data step by step:

1. Income cash – go to PayPal monthly report and find this number in Amount received – please see the attached video.

 

data

2. Refunds – go to credit card report and find the sum of all the negative numbers that are relevant to your suppliers.

negative numbers

3. Outcome cash – go to PayPal monthly report and find this number in Amount received.

Amount received
4. Refunded fees – go to credit card report and find the sum of all the positive numbers that are relevant to your suppliers.

sum of all the positive numbers that are relevant to your suppliers

5. PayPal fees – go to PayPal monthly report and find this number in Fees.

PayPal monthly report and find this number in Fees

6. Monitor – write down the amount you are paying your monitor / or any other market research software every month.

7. Refunds – – go to PayPal monthly report and find this number in Amount received.

number in Amount received

8. eBay feesgo to your monthly eBay invoice and write it down – please see the attached video.

9. At last the total profit – now all you must do is this:

  • add all the green numbers together into the total amount of 2169 euros.

total amount

  • add all the red numbers together into the total amount of 1643 euro.

add all the red numbers together into the total amount

  • the total profit is 2169 – 1643 = 526 euro.

 

I did that calculation every month for 1 year, it was very hard for me to keep all the data, to manage all the numbers and to be sure that the calculation was correct.

 

Moving from manually to automatically

After I understand the real need that dropshipping community has, I decided to create an automatic platform the will do all the calculation for you and much more.

About “My profit myprofit

Our website will do all the calculations for you. We know all the numbers are very complicated and sometimes it just does not make sense.

This is the reason we build this web site – to help you do it, calculate it and learn from it.

 

We will provide you four major things:

  1. Monthly profit calculator – after you will enter the data we need, you will receive full total profit graphs and numbers that will help you understand how much money did you make.
    Monthly profit calculator
  2. Monthly profit and loss report – full data report that will show you exactly what is your revenue, and how much money you pay to different sources until you got the final total profit.
    Monthly profit and loss report
  3. Monthly trends – we will provide unique types of charts that will help you learn about the trend in your business. For example numbers of the item you sell every month, what is your monthly revenue in the last year and much more.
    Monthly trends
  4. Summary report – provides a full data report of your business activity that will show how did you improve in the last year by several indicators like revenue, total profit in money and percentage and much more.
    Summary report

Join us

I will be very glad to show you live performance on our unique platform. You are more than welcome to sign in

Good luck

Nir Erlich – Myprofit

 

Important links –

  1. Paypal report explanation
  2. Positive cash flow
  3. Negative cash flow
  4. Full live demonstration of eBay store profit calculation
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June 18th, 2019|